World Bank cuts India's FY23 GDP

     The World Bank cuts 2022-2023 real GDP growth forecast to 7.5% from 8 % due to inflation, supply chain pressures and geopolitical tensions with regards to the Russia and Ukraine conflicts. The World Bank says that the substantial growth by fixed investments by private and government sectors which will include incentives and necessary reforms. The growth might fall to a 7.1% in the long run.

    The World Bank's forecast is slightly more bullish than the Reserve Bank of India, where World Bank shows a fall of 0.5% and RBI by 0.6%. India's economy grew to 8.7% in 2021-2022 becoming the fastest growing economy in the world. The main reason for the growth came from the agriculture sector and government final consumption expenditure.

The RBI's monetary policy committee raises REPO rate by 50 basis points due to inflation (100 basis points=1%; current REPO rate 4.90%). The Government also slashed excise duties on petrol and diesel, export curbs on items and cut duties on other items too. Rise in prices of all items from fuel and vegetable cooking oil lead to an increase of the retail inflation of 7.79%.

The Russia-Ukraine war is leading to high commodity prices causing supply shortage, increasing food insecurity and poverty, exacerbating inflation and leading to tighter financial conditions.